Exponent: The Company That Failure Built

When Failure set out to do its first Science & Technology story, we chose to profile the science and engineering firm Exponent (Nasdaq: EXPO), not only because of its involvement in high profile investigations, but because we share a common bond. You see, until March of 1998, Exponent was known as The Failure Group. Naturally, Failure wanted to know how people responded to a company that had long used “failure” in its name—and why they ultimately changed to an innocuous moniker. We paid a visit to the firm’s worldwide headquarters in Menlo Park, California, to find out more about a company that makes failure its business.

Founded in 1967 as Failure Analysis Associates, the firm initially gained fame for its work in stress and fracture mechanics—in plain English, how things crack and break. Before long, Failure Analysis was investigating accidents and failures of every kind, including major aviation disasters, fires, explosions and earthquakes. Most of the few thousand projects they handle each year are of the garden variety, but some are the type you see on television or hear about on the radio. Past investigations include the walkway collapse of the Kansas City Hyatt Regency (1981), the Exxon Valdez (1989), the Kobe, Japan earthquake (1995) and TWA Flight 800 (1996).

Exponent also maintains specialized laboratories at its various offices and operates the Test and Engineering Center (TEC), a 146-acre site in Arizona equipped with a two-mile “race” oval and 1,200-foot crash rail. It’s the place to be if you want to see spectacular automobile and aviation crashes. Another company specialty is producing computer animated 3-D re-creations of past accidents and shootings. A few notable examples include JFK’s assassination, James Dean’s automobile accident, the sinking of the Titanic, and a re-enactment of the likely sequence of events in the Nicole Brown Simpson murders.

Up until the past few years, the company focused primarily on these failure analysis-type projects—analyzing data and events after-the-fact. “Traditionally our business has been very event driven—when a plane crashes or a chemical plant explodes,” notes Exponent’s president and CEO Michael Gaulke. “We’re now doing more work before the failure and in that case we’re more proactive. As a generalization I would say people aren’t as actively seeking prevention as they are finding help after something has happened. But in some sense there’s even more value to clients if we can help them avoid an accident or failure. Because these things—at least the large scale ones—are terribly expensive when they do occur.”

Along with placing more emphasis on preventive services, the company’s acquisition of Environmental Health Strategies in 1996 and PTI Environmental Services in 1997 enabled the then-Failure Group to begin investigating a wide array of health and environmental hazards. Today, Exponent commonly studies medical technology, health services, air quality, water resources and water quality, and handles a wide range of human health risk assessments.

However, cold scientific analysis isn’t the only thing that Exponent can provide its clients—which include major corporations, national associations, government agencies and countless law firms. According to Angela Meyer, Exponent’s director of business development, taking human factors into consideration is critical in understanding how and why accidents occur. “We don’t just look at a design,” says Meyer, “we look at how the design is being applied. We also take the human element into consideration. Do people read warnings? What kind of instructions do people utilize or not utilize when working with a product? We take a 360 degree approach, taking all the elements into play.”

Gaulke says that his ‘favorite’ failure, so to speak, dates back to 1992, recounting the story of how NBC’s Dateline television show ran a piece on the GMC C/K pickup truck and its side mounted fuel tanks, basically alleging that it was a rolling firebomb. “We had been assisting GM on that product in particular,” notes Gaulke, “looking at whether it had a safety problem or not. When we saw Dateline it just didn’t look right, because we had crashed a lot of C/K trucks and it just didn’t jibe with anything that we knew of.”

After NBC advised GM that the vehicles in question had been destroyed, Failure Analysis learned that the testing had taken place in rural Indiana and sent a team to scour all the junkyards in the state. “At the 22nd junkyard we found one of the vehicles,” recalls Gaulke, “and we discovered that there was videotape taken by the local fire department of the testing. With the video and a lot of other evidence, we were able to show that the tests had been rigged.”

Failure Analysis discovered that Dateline had crashed a handful of vehicles and gotten no fire so to make the story more dramatic they taped model rocket motors to the frame(s) and ignited those at impact. This information was ultimately the basis that Harry Pearce used—then general counsel for GM—to initiate a lawsuit against NBC. “One of the reasons it’s my favorite failure,” continues Gaulke, “is that Harry Pearce ended up being an internal hero [at GM]. This was a time at GM when morale was down, and the company wasn’t doing particularly well. They were getting beat up in the press and in the courts over the C/K pickup truck, and I think against a lot of internal advice as to whether GM ought to sue NBC, Harry persisted and was successful. As you may know, he’s now the vice chairman of GM, in no small part because of the courage he showed.”

Exponent’s latest major project is a joint effort with the U.S. Army that may ultimately re-define the capabilities of the American infantry soldier. Their contribution to this initiative takes off-the-shelf civilian market technology and applies it towards the development of high-tech weaponry—reminiscent of what one might see in a computer game or Arnold Schwarzenegger movie. “The infantry soldier of the future is going to have a wearable computer with a heads-up display,” describes Gaulke. “The computer will be tied into a GPS [Global Positioning System] so they’ll be able to see a moving map. The weapon they will carry will have a video scope, so they will be able to shoot around corners or out of a foxhole without sticking their head up. The weapon will have a thermal sight so a soldier will be able to see in the dark, and it will have a laser range finding digital compass to see a target and get a range and bearing and know exactly where that target is.” The increased capabilities also will include front-line video transmissions and bio sensors on each individual soldier (so commanders will be able to see how many hearts are beating in their squad). All this makes for a pretty convincing advertisement for the future of the Army.

So what about that name change? It turns out that Exponent’s mid- to late-’90s expansion and subsequent diversification necessitated the conversion. “Neither health nor environment go very well with the notion of failure when you’re trying to find an umbrella name to represent the services of the firm,” says Gaulke. “So for business reasons we needed a name other than the Failure Group.” The name change also addressed an issue that was vexing to some stockholders. Says Gaulke: “Since going public in 1990, one of the most frequently asked questions from investors was, ‘Why don’t you change the name of your firm? Who would ever call their firm The Failure Group and have a stock symbol of FAIL?’”

Cantankerous investors aside, the company reports virtually no problems with having used ‘failure’ in its name and now faces the challenge of transferring its 30-plus years of brand equity as Failure Analysis Associates to Exponent. “I think the biggest problem is that newspaper editors felt like we were taking away some of the best headline opportunities they had,” jokes Gaulke. Not that anybody is complaining about covering Exponent. “Everybody likes to write about the success of failure and variants of that,” notes Gaulke. At Failure we hope they like to read about it too.